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Hill-Rom's Buyout of Voalte to Bolster Digital Connectivity

Zacks Equity Research

Hill-Rom Holdings, Inc. HRC recently agreed to acquire real-time, mobile healthcare communications developer Voalte, Inc. The buyout is expected to strengthen its position in the field of digital and mobile communications platform. The transaction is expected to be completed during Hill-Rom’s third-quarter-fiscal 2019, subject to customary closing conditions.

Based in Florida, Voalte offers a mobile communication platform that enables access and exchange of healthcare information securely inside and outside the hospital. The company has a large customer base with its comprehensive communications platform now connecting more than 220,000 caregivers throughout the United States.

Financial Terms of the Deal

Hill-Rom will buy Voalte for a cash consideration of $180 million and up to an additional $15-million payment related to achieving certain commercial milestones.

The company anticipates this acquisition to be modestly dilutive to its adjusted EPS in fiscal 2019 and increasingly accretive in fiscal 2020 and beyond.

Is the Deal Strategic Fit?

Voalte’scomprehensive communications platform will be integrated into Hill-Rom's care communications business. This combination is estimated to further solidify Hill-Rom's connected solutions including smart hospital beds, vital signs monitors, the LINQ mobile application and its evolving digital offering to deliver better patient care.

The consolidation will enable Hill-Rom to offer customers a single, integrated solution that will deliver actionable data from smart hospital beds, nurse call and patient monitoring technology directly to the caregivers' mobile device.

Hill-Rom is highly optimistic about this strategic acquisition of Voalte, which has steadily generated strong, double-digit growth of recurring revenues. Notably, Voalte’s annual revenues reached nearly $40 million.

Hill-Rom’s Inorganic Growth Graph

Hill-Rom’s merger and acquisition (M&A) pipeline continues to be robust. The company aggressively pursues acquisitions to accelerate growth in five key clinical focus areas viz. advancing patient mobility, wound care and prevention, surgical safety and efficiency, clinical workflow solutions and respiratory help.

This apart, Hill-Rom’s purchase of Welch Allyn has enabled the company to expand its channel access and call points and enhance clinical workflow through EMR connectivity solutions.

Apart from Welch Allyn, the company’s several noteworthy takeovers include Virtus and Aspen Surgical. Each transaction is plays a vital role in the company’s growth. Also, the acquisition of Mortara has been ramping up revenue improvement and is projected to cement Hill-Rom’s Front Line Care business.

Share Price Performance

Hill-Rom has outperformed its industry in the past six months. The stock has gained 7.6% against the industry's 4.3% dip.

Zacks Rank & Key Picks

Hill-Rom has a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are ABIOMED, Inc., ABMD, Penumbra, Inc. PEN and Masimo, Inc. MASI, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ABIOMED’s long-term earnings growth rate is expected at 27.67%.

Penumbra’s long-term earnings growth rate is projected at 20.93%.

Masimo’s long-term earnings are predicted to grow 15.60%.

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